1. In my mind, it would make the Sherman that is directly on the Tiger's flank much more likely to be actually making flanking shots, then somehow hitting "front armor" when it is perpendicular on the side of the Tiger.
2. I'm not sure how this would be a redesigning of the damage model. It would simply be shifting the "If/When" check that is made when a shell hits the armor forward, so that it more accurately actually represents shells striking the frontal armor, rather then shells striking the side of the tank being considered striking the front of it.
The main problem with implementing side armor is that the only factor in which armor value is used for the penetration check is the location at which the bullet makes contact.
If you move the armor threshold further up, so that say 90% of the sides count as "rear armor," then it's very easy for a skilled player to attack ground at your sides if you aren't facing 100% straight towards him, and even if he isn't doing that then there's a good chance that RNG will direct shots towards it anyways. This heavily negates front armor and makes correct facing far, far harder to achieve, and would probably be a major indirect nerf to all heavies. You wouldn't even need to rush in to flank a Panther, you could just have two T-34s engage it at once at perhaps a 20 degree angle to the front, and you'd get "rear armor" crits non-stop.
And of course you don't want to move the threshold further back, because now it's even more impossible to get a successful flank.
I agree that it would be awesome to have side armor in this game, but unfortunately it would require an entire reworking of the ballistics and penetration calculations to fit it in. Penetration would have to take angle into account, otherwise one could hit side armor from the front and get reliable penetrations at an extreme angle. We couldn't just compare locations of the two tanks either, since there's scatter and tanks tend to move a lot during combat, so they'd have to write a script to calculate the angle between the shell and the armor.
It also would make it harder to figure out penetrations for artillery; as it is now it's fairly straightforwards: an artillery shell has a penetration value, and you check it against the armor value of whichever half of the tank it lands on. If you add side armor then what do you do? Divide the tank into four cones for artillery? That seems more or less arbitrary, and at that point just to keep consistency you'd probably have to add top armor as well.
Can direct fire shells hit top armor if they scatter up? If you're shooting from a cliff down onto a tank and hit it in the front, do you check against top armor or front armor? Suddenly dips in the ground become far more dangerous. What if a tank is cresting a hill and get's hit in the bottom, do we add bottom armor now?
See, there are many other matters which must be considered before one can "simply" add side armor. Putting it in would require a great amount of effort from Relic, and they would have to call in team members like Designers and Coders which probably wiped their hands of CoH2 long ago to work on future games. It simply isn't worth the investment of time and money.
But if there's no side armor in CoH3 then there's no excuse.